Motor vehicle conditional sale contracts: guaranteed asset protection waivers.

Existing law governs motor vehicle conditional sale contracts, as defined, and requires sellers of motor vehicles to make certain disclosures to buyers. A willful violation of these provisions is a crime. This bill would establish provisions to govern the offer, sale, provision, or administration, in connection with a conditional sale contract, of a guaranteed asset protection waiver (GAP waiver) , defined to mean an optional contractual obligation under which a seller agrees, for additional consideration, to cancel or waive all or part of amounts due on the buyer's conditional sale contract subject to existing law in the event of a total loss or unrecovered theft of the motor vehicle specified in the conditional sale contract. The bill, among other provisions, would prohibit conditioning the extension of credit, the term of credit, or the terms of a conditional sale contract upon the purchase of a GAP waiver and permit cancellation by the buyer at any time without penalty. The bill would prohibit the sale of a GAP waiver pursuant to these provisions where the loan-to-value ratio exceeds the maximum loan-to-value ratio of the GAP waiver, unless the terms of the GAP waiver disclose that limitation and the buyer is informed of that limitation. The bill would also require prescribed information on the GAP waiver to appear on a document separate from the conditional sale contract, to be separately signed by a buyer or potential buyer. The bill would govern termination of a GAP waiver, including the refund of GAP waiver costs on termination. The bill would require the contract including the GAP waiver to include a statement that the purchaser is generally entitled to a refund of the unearned portion of the GAP waiver charges on a pro rata basis, as specified. The bill would also authorize the buyer to recover from the holder 3 times the amount of any guaranteed asset protection charges paid, if a holder of a conditional sale contract that includes a GAP waiver, except as the result of an accidental or bona fide error of computation, violates termination provisions for a GAP waiver. The bill would include GAP waivers in the existing required disclosures. Because the bill would expand the scope of an existing crime, the bill would impose a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.